Chevron Faces Rare Bidding War in Industry That ‘Does Not Do Hostile’

(Bloomberg) -- How rare are bidding wars in the oil industry? Just ask the chief executive officer of Chevron Corp., now facing a potential fight to buy Anadarko Petroleum Corp.

According to Paul Sankey, managing director for Mizuho Securities USA LLC, Chevron’s Mike Wirth was asked at lunch last week about a rival offer for Anadarko. His response: “The industry does not do hostile bids.” Wirth then asked his questioner, “when was a major oil deal ever topped by a higher bid?”

“I blanked,” Sankey wrote.

The answer is that it’s pretty rare. A few recent examples are much smaller in size than the $38 billion counteroffer Occidental Petroleum Corp. made for Anadarko on Wednesday.

Big Oil’s Infrequent Bidding Wars: 
  • Exxon Mobil Corp. outbid Oil Search Ltd. in 2016 for Papua New Guinea driller InterOil in a $2.5 billion deal
  • Chevron bought Unocal Corp. in 2005 for $18 billion, despite a richer bid from China’s Cnooc Ltd. -- a deal that was questioned by U.S. lawmakers
  • Texaco’s $10 billion purchase of Getty Oil Co. in 1984, beating out Pennzoil and spawning legal battles that went to the U.S. Supreme Court and eventually led to Texaco’s bankruptcy

“Competing bids are not typical,” Biraj Borkhataria, an analyst for RBC Capital Markets, said in a note Wednesday. He estimated Chevron could raise its $65 a share bid by $9 a share.

Sankey, meanwhile, wrote Wednesday that Chevron may add $5 to settle the deal, but also "might just tough this out” given the uncertainty surrounding shareholder approval for Occidental.

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